Chapter 46, Problem 6MCQ

To determine

The percentage change for the quantity demand.

Answer to Problem 6MCQ

Option d is correct.

Explanation of Solution

Explanation for the correct option:

Given Information:

Percentage change in price is 1%

Price elasticity is 5

d.

  $\begin{array}{c}\text{Price elasticity=}\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}\\ \text{5=}\frac{\text{X}}{\text{1\%}}\\ \text{X=5\%}\end{array}$

There will be a 5% decrease in demand if prices are increased by 1% as its elasticity is 5. Therefore, option d is the correct answer.

Explanation for incorrect options:

Since it is calculations based other options are incorrect.

Economics Concept Introduction

Price elasticity of demand: The relationship between the change in demand due to a price change is referred to as price elasticity of demand.